Can I File for Chapter 7?

Due to major revisions to Bankruptcy Law under the Bankruptcy Abuse and Consumer Protection Act (BACPA) of 2005, it is much clearer who is eligible for a Chapter 7 bankruptcy, and who must alternately file for Chapter 13 or Chapter 11 bankruptcy, as applicable.

In Chapter 7, most remaining debts will be discharged once your case has been deemed a “no-asset” case or after the liquidation process.  Certain debts will not be discharged such as domestic support obligations and student loans.  Chapter 7 bankruptcy specifically allocates that the debtor’s non exempt property may be liquidated in order for the debtor to pay off all or a partial amount of the filer’s debt. For this reason, Chapter 7 may be the ideal bankruptcy to choose if you have less property to lose. However, it may be in your better interest to file under Chapter 13, since this process can offer better property protection and can help you save a home, car, or other secured asset when you are in arrears. Chapter 7  helps to discharge large unsecured debts like credit cards, medical bills, and most negligence claims. To assess your finances with the “means test” and to help you find the most appropriate course of action, a bankruptcy attorney can help you with this process.

Chapter 7 Requirements

You will meet with our firm, assess your case and possible issues, decide which chapter is best, then you will be given direction of all documentation and information needed in order to prepare your petition.  This information and documentation is part of the strict due diligence requirements and allows your income, expenses, businesses, liabilities, assets, and property transactions, occurring within a relevant time period, to be fully disclosed.  Some of the documents required to be produced are Federal 1040 tax returns, past six months of pay stubs, and divorce decrees and child support orders.

Whether filing bankruptcy as a joint petition (husband and wife) or separate individual petitions, some information must be included for the non-filing spouse, including, but not limited to, income and expenses. This is needed so the court, the trustee, and creditors can examine the financial circumstances of your entire household.  Furthermore, all debtors are required by law to complete a credit counseling course prior to filing a bankruptcy petition with a provider approved by the applicable Bankruptcy Administrator for the federal district in which you live.  This ensures that you have explored non-bankruptcy options before filing.

Once the petition is complete and is signed, it is filed with the Court.  At the filing, a “bankruptcy estate” is created which consists of all property you own in the entire world, whether or not it is listed. Then, immediately, an “Automatic Stay” against all attempts to collect debts and gain control over estate property goes into effect and your creditors are required to stop harassment and most collection efforts as soon as your case is filed. If any creditor has repossessed any estate property after the filing – whether or not with knowledge of the filing, is considered to have violated the Stay.  If such action was committed “with knowledge” of the case filing, then the bankruptcy court, upon application filed by the debtor, may punish the violator with a judgment for actual and punitive damages including attorney fees.